Tuesday Open Thread [8.6.2013]
The School District of Philadelphia is reviewing their options in suing some Wall Street banks for illegally manipulating an index that underlies the derivatives that the District invested in and lost money on. The Philadelphia City Paper is reporting:
The School District took out swaps with Wachovia (purchased by Wells Fargo in 2008), Merrill Lynch, Goldman Sachs and Morgan Stanley. But a lawsuit could name more banks as defendants. Philadelphia’s lawsuit names banks that were direct counterparties and also those that are accused of rigging Libor, including Citi, JPMorgan, RBC, Bank of America, Barclays, Credit Suisse, Deutsche Bank, RBS and UBS.
It is unclear when the district, which is run by the state-controlled School Reform Commission, will decide whether to file suit, and what damages might ultimately be sought.* The city could seek tens of millions of dollars, says Quinn Emanuel attorney Steig D. Olson, one of the lawyers representing the city. The precise damages at stake — a matter of figuring out how particular Libor manipulations affected particular swap deals — will be determined through discovery.
The final damages will likely be contested. And profoundly complex.
A successful lawsuit, however, could provide sorely needed revenue to Philadelphia schools, which are experiencing the most recent and severe of recurrent fiscal crises. Budget cuts orchestrated by Gov. Tom Corbett have exacerbated historic underfunding, while rampant charter-school growth has siphoned money and students. The result is a “doomsday” budget gap of $304 million and the resulting layoff of 3,859 teachers and critical staff. This after 24 schools were closed for good in June. Only a small portion of that gap has been filled — and only tenuously so. Just a fraction of laid-off workers have been called back.
The school district lost $161M on these swaps, and the District needs this money more than the banks do. This is great reporting, including a very good explanation of these swaps.
The Easton Area School District (PA) banned bracelets that said “I Love Boobies (Keep a Breast)” — raising breast cancer awareness — and suspended the two young ladies who were wearing them. The young ladies took the school district to court, and the 3rd U.S. Circuit Court of Appeals struck down that ban:
The court’s 9-5 decision says that while school officials can ban statements that are lewd or obscene, messages that might offend some, but also make a social or political statement, are protected by the First Amendment.
The decision hinges on an exception to school officials’ ability to ban statements promoting illegal drug use and applies it to speech flagged as lewd or obscene.
What interests you today?
